So, I went to my bank yesterday to withdraw a small amount in foreign currency. They simply had none. I panicked, as I am to make a short foreign trip to one West African country over the weekend. I had earlier approached two banks for Personal Travel Allowance and been told they are not authorized by the CBN to service West African countries. One of them told me that they will not sell travel allowance to anyone traveling less than 5 hours. That is the instruction from the Central Bank. I wondered what needing foreign currency had to do with the distance one needed to go, but I understood that the Central Bank is scared that if they let loose the tap, thousands of Nigerians will make the short trip to any West African country, just to get their hands on the almighty US dollar; the currency without which many Nigerians on social media especially believe that they cannot breathe.
But here I was, with the prospects of not even being able to withdraw the funds I had saved in my account. Luckily, the next day, I was called by my bank that I could come to make the withdrawal. I realized there is a foreign currency scarcity in town. Yes, most people will flip over and complain. However, I remember that this is how it is in all other nations that I have been. I understand that it is not legal or easily accessible, to open accounts in any other currency in the United States of America. I also have experienced several times in the past, when it was tough to withdraw amounts like 5,000 pounds in the UK. Ditto in the UAE, you will be told to call your relationship officer and book ahead, to withdraw foreign currency even as low as $3,000 dollars in some banks. It used to be a bit easier, but as time went on, and as the world got wiser to issues around money laundering and the financing of terrorism, the movement of cash became a herculean and suspicious task everywhere. So, indeed, the scarcity of foreign currency in any country should be the norm. Only your own currency should be freely available, and even then a normal country will flag rapid cash transactions, if only for tax purposes. Many Nigerians find it odd when their transactions are flagged abroad. It is often a culture shock to find out that things we take for granted here, are big deals abroad.
Perhaps what is going on in Nigeria today is the necessary throes of evolution to normalcy. How did we become so externalized and dollarized? How is it that even the unemployed and the broke seek to maintain what we call ‘domiciliary’ accounts, which are opened in foreign currency? How did a lack of confidence in everything that is our own become our norm? Can we not see the nexus between the resistance to ‘buy local’ (whether it is of our food, clothes, or professional services), and our own denigration of our own currency? How did we all arrive at a general – almost unanimous – conclusion that our currency (and by extension our country), must surely become rubbish? Why will we then feign surprise if our prophecy comes to pass? Whodunnit? It is all of us. Our current leaders only helped us hasten the journey to economic Hades, by spending only dollars thereby expressing no confidence in perhaps the most important symbol that unites this country – our currency.
And Buhari was a major factor. The man was elected in 2015 and something came over him. He went to sleep for 6 months doing what? When he woke up, he was still in a stupor. He appointed some ministers after he said they were noisemakers. He said the real work is done by civil servants, whom he cultivated. Civil servants are great policy implementers, at best. Hardly policymakers. And so, there were no policies but a few; for example that one about not allowing people to deposit in their domiciliary account. It was a policy that led to nowhere but confusion. No one was sure what it intended to achieve. Was Buhari going to change the currency again, as he did in 1984 in order to catch those with corrupt money? We waited with bated breath but nothing happened. The forex market remained in suspended animation. By 2016 crude oil prices went into a slump, almost touching $20. The government suddenly found it hard to balance the accounts. All Promises Cancelled (people said that was the real meaning of APC) became the word on the streets. In order to meet up, the government needed to take some hard decisions, but coordination was key. Devaluation meant that the little dollars that came in will command more naira at face value. Buhari also lent his stern but parochial nature to the matter. He granted interviews to the extent that Nigerians with children studying abroad should withdraw them since the country had no cheap dollars with which to subsidize them. He also said the central bank and local banks should stop selling foreign currency to those who wish to dash abroad for medical treatment of any sort.
The apparent hypocrisy killed the naira, because the same Buhari had his children abroad, studying and by any means, being sponsored by the country. The same Buhari then hopped in a plane on more than one occasion and for extended periods of time, to go treat his ailments abroad; of course, paid for by the country and with no accountability whatsoever. The anti-corruption war was dead at that moment, and so was the currency. People wondered what kind of leader will display such terrible wickedness and selfishness. In one fell swoop, in 2016, the naira devalued on the streets to N520 as the central bank could not take decisions on what to do in Buhari’s absence. The Jonathan government had left when the naira exchanged officially for N177 to the Dollar and about N220 on the streets (black market). Because of Buhari’s pronouncements (that he will never devalue the naira), coupled with his indecision, hypocrisy, and absence, people were desperate to buy foreign currency at any rate, hence the plunge. It took an Osinbajo, as acting president, to buy the idea of his liberal economist friends, and technically ‘restructure’, sorry devalue the naira, officially to N306 to the dollar and N360 for businesses. Nigerians were relieved, and the black market rate came down to within a shouting distance of the rates for businesses. Nigeria then maintained multiple rates, until the recent attempts to converge them. The N306 rate was basically available to Buhari and his close friends. Nigerians live for their government. Those in the inner circle of government enjoy so much subsidy at the expense of the nation. Sad.
The recent further plunge was precipitated by the stoppage of dollar sales to the thousands of entities that Nigeria called Bureaux de Change, but who are in fact rentier businesses cashing in on loopholes in policy, with some reliance on influence to obtain licenses, in order to make free money as they deplete the nation’s foreign exchange. Everybody was in the game; politicians, traditional rulers, retired big men of all sorts. And women too. I know guys who have 4 licenses but no offices. A TV station owner told me just yesterday, that he knows a sitting governor with 350 licenses! Sounds unbelievable but such things happen when politicians dig in where the rules are loose. The Naira plunged to as low as N575 on Friday 17th of September, 2021, according to a self-appointed reference point, Abokifx, with which the central bank has picked a major fight. Surprisingly, as at the time of writing (22/9/21), the street rates seem to have depressed to about N560 to the dollar in Abuja at least, and trading on the FMDQ (Financial Markets Dealers’ Quotes), saw a strengthening of official rates as at 21/9/2021. A dealer told PremiumTimes that “A lot of the big players are finding it difficult to trade because abokiFX no longer displays exchange rates anymore. We now sell based on how we buy. There’s a likelihood that naira might appreciate further by tomorrow because the price of the dollar keeps fluctuating throughout today”. I think in singling out Abokifx which had somehow become a phenomenon, the central bank had a good point. The issue though is that there may soon be many wannabes popping up everywhere, but their effect will be minimal. How did Abokifx arrive at N575 as of Friday 17th? Speculative attack on the naira?
That said, there are things the Central Bank of Nigeria can do to stabilize the naira, draw attention to where it matters (official market), and possibly strengthen the currency
1. First is that the Central Bank of Nigeria should stop sending so many people to the black market. What is that thing about 5 hours travel? Can you spend naira in Ethiopia, 4 hours away? What is that about only kowtowing to Europe and America? What is so wrong with stabilizing the currency around us here? So, why not maybe reduce what people traveling to West Africa, sans our direct neighbors, and elsewhere in Africa, get to say $3,000 or even $2,000 for short trips. The spread will not be worth the ticket and the tickets could still be put through the normal checks. This relieves the pressure on the black market and can allow the CBN further claim to be meeting all demands.
2. What if banks stock several currencies the way BDCs do properly elsewhere in the world. Our so-called BDCs only traded in US dollars, putting a lie to their claim to be servicing tourists. Go to Oxford Circus in London, or Soho (Leicester Square), or Chinatown New York, or Manhattan, or anywhere in the UAE, you will find that BDCs stock several currencies. So, the CBN and our banks should give us a regime whereby people traveling to Ghana get Ghanaian cedi equivalent of whatever the CBN approves for travel in that region (say $3,000). If you are traveling for four hours to Egypt, you should get Egyptian Pounds. To Kenya? Give then Kenyan Shillings, or Rands to South Africa. Travelers to Europe should get Euro and so on. We do not have to stock all currencies, but we can offer the closest currency to people traveling anywhere. The US Dollar may naturally still take the highest demand, but a substantial level of demand will be for other currencies. Those who intend to roundtrip funds will find this unpalatable. They may also choose to change the currency to dollars abroad but will incur costs. However, this takes attention off the black market here and stops this unnecessary dollarization of this economy.
3. The CBN has somehow prevailed on Abokifx to take down its daily display of black-market rates. I also noticed that hardly any other site now displays those rates. Indeed, this is a good one for the CBN, and we are minded that the black market is called by that name because it is actually an underground, illegal market. It looks normal to many Nigerians for whom forgery of birth certificates and academic qualifications are run-of-the-mill. For now, it looks like the market has taken the cue. However, the CBN must consolidate rapidly on this gain, by beginning to expand eligible transactions with a view to squeezing out the black market – which will never fully disappear. One of the reasons for the ubiquity of the black market in Nigeria is the ease of doing business with the ‘Mallams’, and the fact that they seem quite good with relationship management as against the banks, whose staff look down on customers seeking a foreign exchange. The Mallams has always been around though, and for a long time until this mad rush for BDC licenses, they were contented with a N2 or N3 spread. The CBN can ignore them, but banks should be more friendly and seamless in their operations. Many customers believe that the banks would rather keep the dollar allocation for their executives by the way, given their disposition to customers so far. There needs to be consistent pressure, surveillance, and even ghost-checking of how the banks are handling the assignment by the central bank. Note that a scenario where banks hold dollar, pounds, euro, rand, Kenyan shillings, Chinese Yuan, Ghanaian Cedis, CFA Franc and others, dissipates the attention on the dollar and reduces the incentive of roundtripping plus frequent conversion to dollar incurs costs.
4. The CBN must then rapidly determine good import demands made in its biweekly auctions and meet them more than before. A scenario where some customers get zero allocation while others get as low as 20% simply means that the bank is not ready to meet demands for import. If we are saving hundreds of millions of dollars weekly that we should have doled out to so-called BDCs, this should give the CBN some space to increase its engagement with eligible transactions and further create an impression of resilience and capability. I believe that with the stoppage of the huge dole-outs to the BDCs, the CBN will soon announce accretion to our foreign reserves. Crude oil has hit a $75 mark, which is good news for our economy.
5. If the CBN can show strength, diversify our forex base, monitor the banks, sanction a few at different levels, then randomly, the CBN can begin to revalue the naira by its intervention in the market. I see that the I&E (Investors and Exporters’) window is dynamically traded at the FMDQ lately. Each day, the naira is traded within a band of about N2 to the dollar. Consistent interjection in the market by CBN, as a supplier, will quickly indicate where the dollar is heading and the CBN can score points if rates begin to trend towards N400, or even better. Let no one deceive himself. The Nigerian forex market is not bottomless. This economy is not even that deep. The demands are more speculative and driven by corruption. If one is not in the league of those trying to spirit stolen or illegal funds to jurisdictions where they don’t know that they may soon not have access to their own money, there isn’t much cause for panic with where the Naira is. Yes, a lower naira value drives inflation. And the recent games being played with the currency, as well as the impression of hopelessness being given by those cashing out, has made sellers of goods and services mark up prices, thus causing artificial inflation where there should be none. Our biggest challenge will be how to reduce the demand for dollars by corrupt people. We know there are so many of them who stash dollars at home. The case of Andrew Yakubu – former NNPC GMD – is still on. We know that the $10 million he stashed in mud houses in Sabon-Tasha (almost rhymes), is chicken feed to many Nigerians, and that was only a bit of his haul. It is a sick state of mind. These guys should have seen the futility of these pursuits for endless money, but no, they have learned nothing and forgotten nothing. Not even COVID-19 and the deaths of many of their friends have taught these guys lessons. However, I believe we can buckle these guys, keep our naira, grow our productivity and economic complexity, and for everyone’s sake, save our nation.